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News : Irish Economy Last Updated: July 3, 2015 - 6:45 AM

Irish Exchequer Returns: Tax €805m above target in H1 2015 — Corporation Tax up €606m
By Michael Hennigan, Finfacts founder and editor
July 3, 2015 - 6:45 AM

Irish Exchequer Returns: Tax receipts to end June show cumulative tax receipts were up €805m or 4.1% on target thanks to an excess of €606m in Corporation Tax revenues which are up 28.1% on the target. Total net voted expenditure to end June was €304m or 1.5% below target.

The Exchequer statement for the first half of 2015 was published Thursday by the Department of Finance and the Department of Public Expenditure and Reform. It shows that the Exchequer deficit at end of the second quarter 2015 stood at €292m. Excluding all of the substantial one-off transactions the underlying Exchequer position is showing a year-on-year improvement of c. €2.7bn due to increased tax and non-tax revenue and reduced expenditure.

Income tax receipts of €8.31bn were collected to end-June 2015, a year-on-year increase of €478m or 6.1%, and was slightly above target (€54m or 0.7%). For the month of June, income tax receipts amounted to €1.27bn, which were exactly on target.

The first six months of the year saw VAT receipts of €6.00bn collected which represents an increase of €441m or 7.9%, when compared to the corresponding period last year and is marginally above target (€36m or 0.6%). VAT receipts for June, were €54m (15.6%) below target, but as June is a non-due month, these monthly figures are of limited use on their own.

The Government said that June is an important month in terms of Corporation Tax receipts. Receipts in the month of June were up €121m (10.8%) on target. "On a cumulative basis, CT receipts have been very strong so far this year and are now €606m (28.1%) higher than expected at €2,765m. It should be noted that €285m of corporation tax receipts were delayed, last year, from June to July. Adjusting for this, corporation tax receipts are up €724m (35.5%) year-on-year. This reflects an improved trading performance across the board and some one off factors."

Conall Mac Coille, chief economist at Davy, commented: "Public finances beat October budget forecasts by €1.4bn in H1, worth 0.75% of nominal GDP: Exchequer returns for June show tax revenues still significantly beating last year’s Budget targets, with spending discipline being maintained. In H1 2015, tax revenues were €805m ahead of target while PRSI receipts were €201m ahead. Total government revenues are now €1bn, or 3.8%, ahead of last October’s budget forecasts.

June is an especially important month for corporation tax, when 20% of the yearly total is collected. In the event, corporation taxes were €121m, or 10.8%, ahead of target on the month, offset by weak VAT receipts — they were €54m, or 15.6%, behind expectations. VAT receipts, however, are still 0.6% ahead of expectations year-to-date, so the weakness in June probably reflects timing issues.

Spending discipline is being maintained. Voted current spending was €109m below budget plans, or -0.4%. Capital expenditure is also being reined in at €39m, or 3.4%, below target. In addition, the exchequer is benefitting from lower-than-expected debt interest costs, in part due to the re-financing of expensive IMF loans early in 2015. Debt interest was €246m, or 5.6%, lower than expected.

We expect the deficit to fall below 2% of nominal GDP in 2015: In total, revenue and expenditure items are €1.4bn ahead of the Budget 2015 forecasts, equivalent to 0.75% of nominal GDP. Should this outperformance be repeated in H2, the deficit would finish 1.5pp inside last year’s target for 2.8% of GDP, or close to 1.3%.

That said, three-quarters of the €800m of outperformance from tax revenues was accounted for by corporation taxes, which can be lumpy and volatile. There is more certainty that the €200m outperformance from PRSI, €36m from VAT and €54m from income taxes will be repeated in H2.

In his April budget statement, Minister for Finance, Michael Noonan, indicated that the government would implement a €1.2-1.5bn giveaway in the Budget for 2016, with the deficit expected to fall to 2.3% of GDP this year – based on tax revenues beating the government’s targets by €1bn in the calendar year. The government’s April forecasts already look too conservative. We expect tax revenues to continue beating budget forecasts, so that the deficit falls below 2% this year."

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